As Americans become more-interested in the choices they face during this election cycle, one thing remains clear: economics is on the mind of everyone - America's small business owners, and the working families they depend on. The anemic economic growth, accompanied as it has been by a massive run up in costs, is front and center for voters each and every day--and while many understand the role that federal regulatory costs can play in this, few understand the actual numbers. And the comparison between this administration and the previous one couldn't be more stark.
Scenario 1: Modest Growth in Regulatory Costs
From 2017 to 2021, under the Trump Presidency, the cost of regulations to the American economy increased modestly from $2.25 trillion to $2.28 trillion, representing an annual growth rate of approximately 0.33%. This was an unprecedented near-stability in direct federal regulatory costs over the four year term of a president, unseen since the rise of the modern regulatory state (during the Obama presidency, the regulatory state grew by 9.53% annually, which caused the cost of regulations to double from $1.2 trillion in January of 2009 to $2.25 trillion in January of 2017 - 9.53% is 28 times higher than .33%!).
In contrast, consider if Hillary Clinton had been elected President in 2016 - assuming for a moment that she had merely stuck to Barack Obama's regulatory tempo (increasing regulatory costs by 9.53% each year), federal regulations would have cost $3.24 trillion by January of 2021, $4.35 trillion by this point (assuming she had been re-elected in 2020 and the tempo of regulatory growth remained unchanged), and would be at $7.35 trillion by 2030.
On the other hand, had the modest growth rate under President Trump been allowed to continue, projections indicate that regulatory costs would have only reached approximately $2.31 trillion by 2025 and $2.35 trillion by 2030. At first glance, this growth might seem relatively manageable. However, considering the broader economic impact, the scenario becomes more alarming.
Using Dawson and Seater’s $19 multiplier for indirect opportunity costs, the economic implications of this growth are significant:
By 2025: With direct costs at $2.31 trillion, the indirect opportunity cost would be: 2.31×19=43.89 trillion dollars
By 2030: With direct costs at $2.35 trillion, the indirect opportunity cost would be: 2.35×19=44.65 trillion dollars
These figures underscore the far-reaching impact of even modest increases in regulatory costs. The opportunity costs reflect potential economic activities foregone due to the regulatory burden, including innovation, business expansion, and job creation.
Scenario 2: Rapid Acceleration of Regulatory Costs Under Joe Biden
In a more dramatic scenario, regulatory costs increased from $2.28 trillion in January 2021 to $3.58 trillion by April 2024, translating to an annual growth rate of 14.06%! If this rapid growth rate continues, the projections indicate:
By 2025: Regulatory costs will be approximately $3.95 trillion.
By 2030: Regulatory costs would soar to approximately $7.52 trillion (slightly higher than they would have been under an Obama/Clinton regulatory tempo).
Applying the $19 multiplier to these projections reveals a staggering economic impact:
By 2025: With direct costs at $3.95 trillion, the indirect opportunity cost would be: 3.95×19=75.05 trillion dollars
By 2030: With direct costs at $7.52 trillion, the indirect opportunity cost would be: 7.52×19=142.88 trillion dollars
These projections highlight the exponential increase in economic burden associated with rapid regulatory cost growth. The difference between the two scenarios is not merely in the trillions of dollars in direct costs but extends to hundreds of trillions in lost economic opportunities.
Conclusion
The contrast between the two approaches to regulation couldn't be more stark. Under one, recognizing the important role that regulatory costs play in suppressing economic growth, the economic stability of a modest, conservative approach to regulations saves the American economy $5.17 trillion in direct regulatory costs ($7.52 trillion minus $2.35 trillion) - and in terms of lost opportunity cost, the difference couldn't be more stark - a savings of almost $100 trillion in lost opportunity costs!
Preventing $100 trillion from being taken out of the American economy is the difference between life and death for the future of the United States. One path makes America an economic powerhouse, the other a vast wasteland where Americans will wonder "what could have been."
